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Indirect Taxation, Tax Evasion and Profts

Author

Listed:
  • Luciano Fanti

    (University of Pisa)

  • Domenico Buccella

    (Kozminski University)

Abstract

In a duopoly with differentiated products under price competition, this paper analyses the frms’ tax compliance behaviour in the presence of tax evasion to challenge the conventional wisdom that indirect taxes penalise profts. In contrast to the preceding literature, it is shown that indirect taxes can increase frms’ profts. The appearance of this unconventional fnding is more likely when there exists a sufficient competitive pressure in the industry and the effort for detecting evasion is not too strong

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2022. "Indirect Taxation, Tax Evasion and Profts," Hacienda Pública Española / Review of Public Economics, IEF, vol. 242(3), pages 91-109, September.
    • Handle: RePEc:hpe:journl:y:2022:v:242:i:3:p:91-109
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    References listed on IDEAS

    as
    1. Giovanni Immordino & Francesco Flaviano Russo, 2018. "Fighting Tax Evasion by Discouraging the Use of Cash?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 343-364, June.
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    3. Goerke, Laszlo & Runkel, Marco, 2006. "Profit Tax Evasion Under Oligopoly With Endogenous Market Structure," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 851-857, December.
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    5. Piolatto Amedeo, 2015. "Itemised Deductions: A Device to Reduce Tax Evasion," German Economic Review, De Gruyter, vol. 16(4), pages 422-438, December.
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    7. Hashimzade, Nigar & Huang, Zhanyi & Myles, Gareth D., 2010. "Tax fraud by firms and optimal auditing," International Review of Law and Economics, Elsevier, vol. 30(1), pages 10-17, March.
    8. repec:dgr:kubcen:201060 is not listed on IDEAS
    9. Luciano Fanti & Domenico Buccella, 2021. "Tax evasion and competition in a differentiated duopoly," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 385-411, September.
    10. Laszlo Goerke, 2017. "Tax evasion in a Cournot oligopoly with endogenous entry," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 754-779, September.
    11. Laszlo Goerke & Marco Runkel, 2011. "Tax evasion and competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 711-736, November.
    12. Martin Besfamille & Philippe De Donder & Jean Marie Lozachmeur, 2009. "Tax enforcement may decrease government revenue," Economics Bulletin, AccessEcon, vol. 29(4), pages 2665-2672.
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    Cited by:

    1. Domenico Buccella & Luciano Fanti & Luca Gori, 2024. "Competitive wages and tax evasion in a Cournot duopoly," Theory and Decision, Springer, vol. 97(3), pages 585-594, November.

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    More about this item

    Keywords

    Tax compliance; Sales tax; Tax evasion; Proft; Bertrand competition.;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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